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24 October 2012

UNCTAD: Global FDI inflows declined 8% in the first half of 2012, China largest recipient of FDI

Switzerland - 23 October 2012 - In the first half of 2012, global FDI fell by 8 per cent to an estimated US$668 billion, down from US$729 billion in first half of 2011. This was due to increased uncertainty in the global economy, marked by fears of an exacerbation of the sovereign debt crisis in Europe and a slowdown of growth in major emerging market economies.

Compared to full year forecast of FDI inflows published in July, UNCTAD's tenth Global Investment Trend Monitor now project that FDI flows will, at best, level-off in 2012, at slightly below US$1.6 trillion.

The slow and bumpy recovery of the global economy, weak global demand and elevated risks related to regulatory policy changes continue to reinforce the wait-and-see attitude of many transnational companies (TNCs) toward investment abroad. UNCTAD's longer term projections still show a moderate rise. However, the risk of further macroeconomic shocks in 2013 can impact FDI inflows negatively.

"Investment leads economic growth but the current trends of investment flows to developing countries, particularly to Asia, are worrisome and the challenge for channelling FDI into key development sectors such as infrastructure, agriculture and the green economy remains daunting" said Secretary-General of UNCTAD, Dr. Supachai Panitchpakdi.

The US$61 billion fall was mainly caused by a decline of US$37 billion in inflows to the United States and a US$23 billion fall in inflows to BRIC countries – Brazil, Russian Federation, India and China.

Half-year inflows to China amounted to US$59.1 billion ―a 3 per cent decline from US$60.9 billion in the first half of last year. China is experiencing structural adjustments in their FDI flows, including the relocation of labour-intensive and low-end market-oriented FDI to neighbouring countries.

Despite a slight decline in FDI inflows, China became the largest recipient country in the first half of 2012, followed by the United States (US$57.4 billion).